Wednesday, November 28, 2018

Lakewood housing hunt drew Columbus developer here

Preliminary site plan for Solove Real Estate's high-end market-
rate apartment complex on Detroit Avenue east of Bunts Road
in Lakewood. (BBCO Design)(Click to enlarge all images)
Anyone who has tried to buy a high-quality, competitively-priced home in Lakewood in the last year or two knows the drill. The real estate search is one of the most difficult scavenger hunts you'll play. Unless you're willing to sacrifice many features you want in a home or make a high, all-cash offer, a Lakewood housing hunt is not a game for the impatient.

Real estate developer Jerry Solove of Columbus knows it all too well. His son spent the past year looking to buy or rent a home in Lakewood. Solove and his son learned that quality homes sell within a day or two of being listed with a realtor, with some prices bid upward in all-cash deals. Solove recalled seeing a renovated bungalow for sale this summer on Mathews Avenue, behind the Around The Corner Saloon. It was listed in the evening and, before the sun rose again, it was already under contract by a buyer.

Experiences like this are one reason why Lakewood housing prices rose 22.5 percent, highest among all Cuyahoga County communities in 2018. Another reason for the price spike is that Lakewood has lost more than 1,700 housing units since the 1980s due to demolitions of housing and conversions of rental doubles into single-family, for-sale homes.

Lakewood housing inventory is limited. Only East Cleveland's housing stock is older than Lakewood's in the county. Another reason for the price spike is the growing interest by Milennials and Baby Boomers, the two largest generations in U.S. history, in downsized housing in walkable settings -- something that the streetcar suburb of Lakewood touts. And still another reason is that the Greater Cleveland's economy has picked up significant momentum in recent years, adding jobs faster than all but 15 other metro areas.

Columbus developer Jerry Solove addresses a Nov. 27 public
meeting about his proposed Lakewood project. (Prendergast)
Eventually, Solove's son found a decent Lakewood apartment.

"But we spent a year trying to find a home," Solove said at a public meeting at Lakewood City Hall on Nov. 27. "The community need is for more single-level housing. We intend to focus on two category of residents. First are people just starting their careers and families, and earning $45,000 to $85,000 or more. Second, we want to serve empty-nesters who don't want to climb stairs."

His Columbus-based firm, Solove Real Estate, is proposing to build an apartment complex with 278 housing units in two mid-rise buildings, a 375-space parking garage plus a pocket park and a rooftop lounge on the site of the former Spitzer Lakewood Chrysler dealership at 13815 Detroit Ave. and neighboring Educators Music. The development plan is at a conceptual stage, called a massing, and will be refined with more input.

Conceptual plan of proposed development. Above, this view
looks south from Detroit Avenue. Below, the view looks
northward toward Detroit Avenue. (BBCO Design)
"Our goal is to try to have a pedestrian feel along Detroit (Avenue)," said Bhakti Bania, CEO of  BBCO Design -- Solove's architect. "There will be heavy landscaping on all of our perimeters."

The preliminary idea is to have a five-story parking garage with an entry off Parkwood and fronted by apartments on Detroit with a one-story amenity building south of the parking garage. The building west of Parkwood would be eight stories of apartments and a public pocket park. All servicing (utilities, waste, etc) would be off Bunts, Detroit and Wyandotte.

The public meeting was the first step in a four- to six-month-long city review process that will start in January or February and be shaped by public input, traffic studies, market data and the city's existing development masterplan called Community Vision. That plan, updated most recently in 2017, has these guiding principles for housing:

  • A housing market that is stable and provides for moderate growth in housing values.
  • Adequate housing opportunities for the city’s economically and culturally diverse residents.
  • A high-quality housing stock that is diverse in style and is well maintained through proactive code enforcement and community home improvement programs.

It can be argued that this proposed development responds to all of these masterplan goals by helping to address the shortage of quality, contemporary housing that is, in part, causing Lakewood housing prices to spike and taxes to rise.

"We work hard for urban development," Solove added. "We try to have pedestrian-friendly communities. The attention to detail is very important to us. We have a good retention rate and we take a lot of pride in what we do."

Solove has a purchase agreement with Spitzer Lakewood Chrysler Plymouth and a partnership with Stavash Family LLC. The buildings on those parcels will be demolished. The Stavash family, which has owned Educators Music since it opened in 1960, sold their company to two partners on Oct. 4, according to the Ohio Secretary of State's website. The two partners, Scott McDermott and Bill Craighead, introduced themselves at the Nov. 27 meeting.

Attempts by Solove to purchase the 0.35-acre parcel used by Bruce's Automotive & Fleet Services, 13919 Detroit Ave., were rejected by George Shaker. He owns G & M Property Management 3 LLC, which in turn owns the property leased by Bruce's Automotive.

"We tried to incorporate Bruce's but he (Shaker) wants nothing to do with that," Solove said.

One of the early steps would involve rezoning the roughly two acres of land from C-3 Commercial to Planned Development, said Bryce Sylvester, the city's director of planning and development. Solove said he is not seeking any public subsidies from the city for this development -- a testament to the strength of Lakewood's real estate market.

"Bill (Craighead) and I drove to Columbus to see Solove's developments first-hand," McDermott said. "I was impressed with Solove's developments. This (Lakewood project) is a market-driven development. It will fill quickly."

The goal is to start construction in 2019 and open in the Spring of 2021, Solove said.


Wednesday, November 21, 2018

Another big investment coming to Lakewood

Two acres of mostly vacated land near the center of Lakewood
is proposed to be redeveloped by Columbus-area real estate
developer Jerry Solove (CLICK TO ENLARGE).
Over the past 30 years, Lakewood has lost more than 1,700 housing units, with only Cleveland, East Cleveland and Euclid losing more. The average age of its housing stock is the second-oldest in the county. At the same time, growing interest in traditional, walkable communities has made Lakewood a hot real estate commodity. It's why Lakewood had the highest property value rate of increase, 22.5 percent, among all Cuyahoga County communities in 2018.

So, to say that real estate investors are interested in Lakewood is an understatement. That includes everyone from real estate corporations to mom-and-pop renovation companies converting duplexes into luxury single-family houses to people simply trying to outbid each other for their next place to live.

Furthermore, the biggest, most underutilized properties are highly sought after. Those that often fall into that category are former car dealerships whose automotive operations have left for outer-suburban highway interchanges. The next one is about to fall.

Jerry Solove, of Columbus-based Solove Development Inc., has a contract to acquire about 2 acres of the former Spitzer Lakewood Chrysler dealership at 13815 Detroit Ave. and neighboring Educators Music. Terms of the sale are not available. The 1.6-acre Spitzer property and structures are valued at $767,500 for real estate taxes, according to the Cuyahoga County Fiscal Officer's records. The 0.4-acre Educators Music property and its two structures have a tax value of $232,300.

A two-acre parcel could provide enough room for several dozen townhomes or two or more multi-family residential buildings with ground-floor retail facing Detroit Avenue. Solove's plans will be revealed at a public meeting at 7 p.m. Nov. 27 at Lakewood City Hall's auditorium.

Solove Development Co. has built a variety of residential and
mixed-use styles depending on their immediate surroundings.
Above is The View On Pavey Square offering student housing
near Ohio State University. Below is phase 2 of The View On
Fifth in Columbus' Grandview Heights neighborhood. These
are a small glimpse of the architectural and land use styles
developed by Solove Development (Solove).

Much of Solove's recent developments have been in Columbus. Most are near the Ohio State University campus and in the neighborhoods just north of downtown Columbus. Lakewood is obviously a different market, but has some similarities as well. Lakewood is popular with young professionals and new arrivals to Greater Cleveland, based on all of the out-of-state license plates seen around town and the new faces in Lakewood's schools and day care centers.

Someone can learn a lot about a real estate developer by looking at what types of projects and genres they like to build. Developers of projects in urban and inner-ring suburban neighborhoods prefer to stick with projects common in those areas. Look for three- to six-story buildings of for-sale townhomes or market-rate apartments, sometimes with a shop, restaurant or cafe to provide a pedestrian-friendly street presence on a busy thoroughfare.

Due to recession-induced restructuring in the auto industry, Spitzer lost its Chrysler Motor City franchises in Parma and Lakewood in 2010. Spitzer still owns much of its Lakewood site but leased its building and parking/inventory lots to Wingstar Transportation LLC which began in 2013 to provide trucking and logistics services.

Joining Wingstar at the dealership was its sister company, Volens LLC. It began in 2015 to provide trucking equipment, trailers and tarps for shipping purposes. But Wingstar and Volens quickly outgrew the 1.6-acres of land south of Detroit, divided by Parkwood Road, and are looking for more space elsewhere.
Educators Music closed last spring after it and the house behind
it was sold to Solove. The former Chrysler dealership is just out
of view to the right, and shown in the view below (Google).

Also under contract to sell is the Stavash Family Limited Liability Co. which owns Educator's Music, 13701 Detroit Ave. and the house behind the store at 1406 Wyandotte Ave. Educator's Music was started in the early 1950's by the late John Stavash Sr., once a member of the world-renowned Cleveland Orchestra. He built the store building in 1960. His son, John Jr., runs the business today and temporarily relocated to the house behind the now-closed store.

It should be noted that Solove's plans don't include the 0.35-acre parcel used by Bruce's Automotive & Fleet Services, 13919 Detroit Ave. It is at the highly visible corner of Detroit and Bunts Road. This property is valued at $165,600 for taxes and owned by G & M Property Management 3 LLC, which in turn is owned by George Shaker. Shaker has owned the property either directly or through a company for more than 40 years, county records show.

Copy of a letter sent to property owners near
the proposed Solove development site.

According to sources, Shaker has been approached by multiple persons seeking to buy this site, including a Columbus-based real estate broker. However, Shaker has turned them all down. He has a multi-year lease with Bruce's Automotive which recently expanded into the former Baker Towing site on Detroit, just east of Cove Ave. 

There are more than a half-dozen recently built, under construction, or planned real estate investments along Lakewood's Detroit Avenue corridor. These include Rockport Square Townhomes built on the former Fairchild Chevrolet, Center North Apartments in the former office tower, McKinley Place townhomes built on the former McKinley School, One Lakewood Place mixed-use development at the former hospital site, an unknown residential development planned on the site of the now-closed Steve Barry Buick and neighboring Bobby O's Place tavern, an unknown development at the closed Trinity Lutheran Church, and an unknown development at the closed Phantasy Cleveland theater complex.

Combined, they would make a significant dent in the loss of housing inventory that has helped drive Lakewood's population loss, declining from a peak of 70,000 residents in 1970 to 60,000 in 1990, to 50,000 today. Having more modern housing options to complement the many historic and, in some cases, obsolete housing in Lakewood will enable the community to remain as an attractive place to live for years to come.


Monday, November 19, 2018

Cleveland's profile soars among out-of-state investors

Development of Cleveland's Flats East Bank also tracks with
the metamorphosis of Cleveland's economy in the last decade.
In that time, the Wolstein Group and other developers sought
huge public subsidies to justify their earlier investments. Now
Akara Partners, a Chicago-based firm, has joined Wolstein to
help develop Phase 3. It will be Akara's first investment in
 Cleveland (Akara)(CLICK PHOTOS TO ENLARGE).
Presidential candidate Ross Perot in 1992 famously referred to a "huge sucking sound" when it came to jobs leaving the USA. When money starts pouring into a city like Cleveland, it ought to make a sound, too. It is, and people are noticing.

Since the late 20th century, capital investment in Cleveland typically came from wealthy Clevelanders who loved their community and wanted to give something back to it. It was done in the name of altruism, not a healthy return. Indeed, local real estate investors who had to answer to out-of-town shareholders -- especially the highly demanding folks on Wall Street -- could never hope to justify investing in Cleveland. It's why publicly traded firms like Forest City Enterprises had stopped investing locally and instead directed their efforts toward coastal markets plus a few booming inland cities like Atlanta, Chicago, Dallas and Denver.

But nothing ever stays the same. Real estate markets get over-crowded with investors and overheat. Some get overbuilt. That's when real estate investors start looking for the next big thing. And they start looking for bargains.

NRP Group's 308-unit The Edison was the fastest lease-out of
a residential project in the history of the nation's 7th-largest
apartment developer. NRP, which seeks to expand The Edison
in 2019, recently joined forces with New York City-based
Tripost Capital Partners for an equity stream (Aerial Agents).
Enter Cleveland. And, to be fair, enter other Rust Belt cities that were also economic drivers of the late 19th and early 20th centuries whose momentum carried their growth briefly into the second half of the 20th century. Buffalo, Cincinnati, Detroit, Milwaukee, Pittsburgh, St. Louis and others are joining Cleveland, in part because of what they gained as the economic powerhouses of the industrial revolution. Their wealthy benefactors plowed riches into libraries, parks, museums, performing arts, institutions of higher learning and other assets that approach or even exceed those of the nation's top-tier cities. Nearly all of these cities still possess and support those assets.

And that's why, when coastal bargain hunters began looking for a good investment, they found Cleveland. Of course, you can't make money just by owning something cheap. There has to be a realistic hope for growth.

In doing an e-mail survey of real estate developers and entrepreneurs, they are noticing a big change in out-of-state investment in Cleveland. This is also borne out in the voluminous list of hot-linked headlines shared below. What do investors say is the reason? Greater Cleveland's positive job reports.

We locals sometimes question the validity and usefulness of those reports because we see the story on the ground, especially on Cleveland's troubled East Side. But out-of-state investors really do pay attention to this data. They are predicting population gains, so they are partnering with developers and entrepreneurs to try to get in on this market early.
With real estate investments throughout the Midwest, Chicago-
based Harbor Bay Group will enter the Cleveland market for
the first time with its Market Square development, on which
it plans to begin construction in 2019 in Ohio City (HPA).
Cleveland's job market has shot up in 2018 (includes the latest October data, which continues to show strong, steady growth) in all sectors except information technology and "other services." Job growth in Greater Cleveland is now increasing at a pace that ranks it with some of the fastest-growing metropolitan areas in the USA. The Web site recently announced that Cleveland ranked in the top 10 nationally among cities that had more jobs available than people to fill them. Global real estate firm CBRE ranked Cleveland 8th nationally in technology and talent growth "momentum markets."

Respondents to my e-mail survey cautioned that capital is not transferring away from the coasts. There are no signs that development is slowing in coastal cities as well as a few inland cities like Atlanta, Denver or those in Texas. Instead, it appears that investors are trying to diversify, and Cleveland, Pittsburgh and Detroit offer great opportunities to do that at a fraction of the cost of the coasts. Put it this way, respondents say they are more confident in the futures of Cleveland, Pittsburgh and Detroit than Chicago. They feel Chicago is building a bit of a bubble while its smaller Midwest neighbors still have huge growth potential and pent-up demand. Plus the image of Cleveland is definitely starting to change.

So investors are branching out into newer markets because of the overcrowding and cost of land in some of the East Coast markets. Insiders confirm that investors want to continue to put money in the Northeast markets because they are stable, but the opportunities are growing in the Midwest, and they are feeling very confident about diversifying their investments by putting money into the old Rust Belt powerhouses.

And it's not just Cleveland's residential projects that are attracting out-of-state investors. They're industrial and entrepreneurial projects as well.

Put simply, investors can get more for their money here, most say. They can buy and hold and get good returns versus markets with higher barriers to entry like on the coasts, and whose value is largely driven by investors from out of the country. They are at risk of a bubble and may already be over-priced.

Lastly, demographics here in Cleveland are starting to change slowly and, if they really pick up, these investors will be poised for even better returns should they stay or exit the market and sell the assets they've acquired. This is particularly visible when it comes to industrial properties around the area and the general lack of good industrial space that suits the needs of end users.

But don't depend on the word of unnamed sources. Look at the totality of recent actions by investors, not to mention the quality of their actions. They range from examples of direct investments in projects, to the opening and expansion of offices locally.

I don't expect readers to open all of these links and to read all of the articles (you can, if you want). But the story told by the totality all of these headlines is compelling...

11-13-18 / Arcapita of Bahrain teams up with homegrown landlord Weston Inc. to buy seven suburban industrial buildings

11-13-18 / Real estate investment-advisement firm Raider Hill Advisors expands to Cleveland 

11-07-18 / Dealmaker's guide to 15 cities where M&A thrives

11-06-18 / Bay Area tech startup sees a rent-to-own housing solution — just not here, invests in Seattle, Memphis, Atlanta, and Cleveland instead

10-26-18 / Dallas M&A firm Generational Equity opens office in Cleveland where outsourcing companies are booming

10-03-18 Santander Bank of Spain quietly enters Ohio market with Cleveland loan production office

09-11-18 / Align Capital buys Cleveland's enterprise asset management firm Predictive Service, merges it with Lewellyn Technology

09-09-18 / CBRE Group adds jobs to Cleveland, Akron offices to keep up with growth

06-24-18 / Biomedical investment growing in Cleveland, Midwest

03-09-18 / A dozen companies selected for Plug and Play Cleveland accelerator

01-28-18 / Banks feeling the draw to Northeast Ohio to break into market

01-09-18 / Courtland Partners of Cleveland agrees to be acquired by New York real estate investment firm, from among many suitors

11-26-17 / Bank of the West sees Cleveland region as growth zone

10-10-17 / Pennsylvania's NexTier Bank expands into Ohio with Cleveland market loan office

08-13-17 / Historic investment aims to bring opportunity, prosperity

08-10-17 / SunTrust Bank opens commercial banking offices in Cleveland, Cincinnati

07-31-17 / Fund That Flip plans to expand in Cleveland

07-30-17 / Investors starting to shower their love on Cleveland

05-17-17 / Marcus & Millichap’s IPA division launches Midwest Multifamily Group, bases its HQ in Cleveland

05-02-17 / Citizens Bank buys Cleveland M&A advisory firm Western Reserve Partners

There are many more stories that could be shared, but remain behind the scenes. They include small to large coastal investors taking board seats on Cleveland-based real estate firms and business expansion organizations to provide larger, more continuous streams of equity. These resources can only mean more jobs, construction activity and a higher quality of life for Greater Clevelanders.

"The talk at our company would have anyone very excited for what's to come in Cleveland and other Rust Belt markets," wrote a manager at a large, Cleveland-based residential development firm. "I think the 'sleeping giant' is finally awakening."


Thursday, November 8, 2018

Big developments converge on Ohio City's Red Line station

Ohio City station-area develop-
More developments are cozying up to the Greater Cleveland Regional Transit Authority's (GCRTA) Red Line and station in Cleveland's Ohio City neighborhood. The scope and scale of the planned developments are unlike anything that's been built along Cleveland's underutilized rail transit system, outside of the downtown area and University Circle. The lack of dense developments around rail stations has a direct correlation to the usage of the rail system. But that's starting to change.


Red Line Greenway (Vocon)
In 2019, construction will begin on the 2-mile, $6 million Red Line Greenway trail from near the Zone Recreation Center at West 53rd Street to the bluff overlooking the Cuyahoga River above Franlkin Ave. It will be on the south/east flank of the Red Line tracks, in some cases within a few feet of them.

Harbor Bay's Market Square development (HPA)
Also sometime in 2019, Chicago-area Harbor Bay Real Estate Advisors hopes to start construction on Market Square, a 3-acre development at West 25th Street and Lorain Avenue with a 12-story office building, 10-story apartment building, ground-floor retail and a 550+ car parking deck just above the west side of the Red Line tracks.

But if you don't think that stunning scale of development is enough, then you're in luck. Because there's more:

Look for an announcement in 2019 regarding the former Brickhaus Towers/One Twenty West development, first proposed by Andrew Brickman. With a lot on his plate already, a larger, more prominent local developer is seeking to take over this site to deliver as many housing units as possible to the booming near-West Side. Sources asked that this developer not be named publicly as the company doesn't like to announce a project unless it is more than 90 percent certain the project will happen.

That, of course, means this project is far from certain. But this site is in a prime location. It's across Lorain Avenue from the GCRTA station, has an unobstructed view of downtown, is a short walk to the West Side Market and the West 25th business/restaurant district, and is next to the Towpath Trail plus the planned Red Line Greenway. The Scranton Peninsula development will be down the hill along the Cuyahoga River and won't block the views here.

Original plan for Brickhaus Towers/One Twenty West (HPA)
Furthermore, the new developer will likely go back to something like Brickman's original vision for this site -- a larger-scale mixed-use development with mid- to high-rise towers offering 500-600 apartments with ground-floor retail and live-work units facing Lorain. Brickman scaled back the project in his last conceptualization. The new developer is not concerned about the scale of this project, citing increased interest by New York City investors in Cleveland and its newfound job growth.

Last but not least is the development of GCRTA-owned land along Columbus Road, above the Red Line and the planned alignment for the greenway. In the hopes of attracting a "high-quality, dense, mixed-use, transit-oriented development," GCRTA publicly issued a request for qualifications (RFQ) from developers so that a selection committee could choose the most capable company to whom the authority could sell or lease its land. The deadline for developers to respond was Oct. 11.
Rezoning changes approved by Cleveland City Council on
Oct. 17. The blue rectangle shows an area larger than what
GCRTA ultimately included in its development RFQ (CPC).
GCRTA Real Estate Manager James Rusnov said in an e-mail to All Aboard Ohio, a non-profit that advocates for better public transportation and more transit-oriented development, that it won't reveal the identity of the winning bidder or how many responses GCRTA received to the RFQ until after a development agreement is submitted to the GCRTA board. That probably won't happen until February or March of 2019.

However, a neighborhood rumor is that Sam McNulty, a proponent of mass transit and biking, is very interested in developing this property. His Duck Island 7 development at Columbus Road and Abbey Avenue, with townhomes selling for $500,000 to $600,000 each, is nearly sold out. And, on Nov. 3, McNulty posted on Instagram a photograph of a large roll of construction blueprints to be submitted to the city's Building Department for a large development. He pledged to "announce the details soon."

Sam McNulty's Nov. 3 Instagram post (Instagram)
An architect's name was visible on the blueprints -- Dimit Architects, which designed McNulty's Duck Island 7 project. Dimit sources refused to identify the project associated with those blueprints, deferring to McNulty. Considering that McNulty referenced getting building permits from the Building Department, they aren't for the GCRTA property. Its sale is still months away from being approved by the RTA board.

Cleveland City Council on Oct. 17 voted unanimously to rezone multiple parcels of land in the fast-growing Duck Island neighborhood (see map above). It followed the creation of a development masterplan based on public input. The land along the west side of Columbus Road, from Lorain to West 25th, was rezoned from semi-industry to "multi-family G-1" which allows a range of residential uses, from single-family homes to apartment buildings. The maximum square footage of a building on a property zoned G-1 is three times the lot area and can be up to 35 feet in height based on the street frontage. However, the Red Line right of way below Columbus Road is 25-30 feet lower.

Sam McNulty's Duck Island 7 townhomes (Mendo/UrbanOhio)
Rusnov noted that the GCRTA-owned land that is the subject of the RFQ is south of Abbey, measuring 85 feet by 700 feet. That brings it to the vicinity of the Wiley Avenue intersection. The land north of Abbey, next to GCRTA's Ohio City station, is not part of the RFQ because Rusnov said it is where an ADA access ramp to the greenway will be located.

GCRTA's RFQ stipulates that developers have the option to request additional land if a larger project is proposed. However, Rusnov emphasized that the Red Line Greenway is "distinct from the development site and is fully contained on a separate parcel of land."

GCRTA's Ohio City Red Line station (KJP)
Property south of Wiley isn't part of the RFQ because the GCRTA right of way widens in that area. It adds a third track that serves as a Red Line maintenance siding. A greenway ramp to/from West 25th will also be located south of Wiley. And, long term, the Duck Island masterplan proposed an extension of Monroe Avenue over the Red Line tracks and greenway to Columbus Road. That will allow the removal of Columbus Road's dangerous, angular intersection with West 25th and open up a multi-acre site for future development.

Increasingly, as living, working, shopping and playing becomes more popular in Ohio City and the adjoining Duck Island neighborhood, space is going to be at a premium -- especially near high-capacity public transportation stops like rail stations. Indeed, these latest developments show how much in demand this area is becoming.